President banks on China for Zimbabwe's economic revival

President Robert Mugabe pinned his hopes on China helping to revive Zimbabwe's struggling economy on Tuesday and outlined reforms to investment rules to try to attract more capital.

In his first state of the nation address in eight years, the 91-year-old president, who has presided over economic collapse and diplomatic isolation since he came to power in 1980, said strong growth was just around the corner.

"Zimbabwe is already positioning itself for major economic take-off in keeping with ZIMASSET (economic plan), which requires massive capital injection and rapid implementation," Mugabe said in a 25-minute speech.

"This has seen government signing key projects with China, covering energy, railways and telecommunication, water, mining, agriculture, and tourism," he said amid constant jeers from the opposition and cheers from members of his ruling ZANU-PF party.

Although the economy has stabilised since 2009, hopes of a big economic recovery and two million jobs promised by Mugabe's ruling ZANU-PF party are fading.

The president's opening comments during a joint sitting of parliament were to thank the country's security and defence forces in maintaining peace under difficult economic conditions.

Political analysts, however, say with the opposition in disarray following a major split last year and Mugabe having purged possible internal rivals last year, there was no immediate threat to the veteran leader's grip on power.

"We expect a clear and robust legislative framework ... that streamlines investment and ... a one stop investment centre," Mugabe said. "This is now a high and priority matter which those responsible will be held to account."

A major concern of foreign investors is a law requiring foreign-owned businesses to sell at least 51 percent of their shares to locals. In his speech, Mugabe did not mention the law, which the government says is being constantly reviewed.

DROUGHT

He reiterated that the economy would grow 1.5 percent this year, half the initial forecast due to a drought and weak commodity prices.

The drought's impact is looking particularly serious for Zimbabwe, where the economy has been struggling for five years to recover from a catastrophic recession that was marked by billion percent hyperinflation and widespread food shortages.

A pariah in the west for more than a decade, Mugabe said the government was working to strengthen ties with international lenders like the International Monetary Fund and the World Bank, which Zimbabwe owes $9 billion.

"Current re-engagement efforts with bilateral and multilateral partners ... should see improvement of relations and opening up of new financing avenues for long overdue reforms and development cooperation," he said.

He promised to overhaul investment laws by the end of the year to make it easier to do business and attacked bosses of government-owned firms for huge monthly pay, which, he said "borders on the obscene, reflecting avarice and greed".

China's high profile investment in Africa has failed to live up to the hopes of many on the continent and Beijing is now focused on stemming a sharp stock market slide.

Many companies in Zimbabwe are struggling to pay salaries or are forced to close due to power cuts, the high cost of capital and competition from cheap imports.

Labour unions say companies have laid off more than 20,000 workers in the last month alone.